Common sense transparency for economic development

Jess Fields

Published
3:57 pm CST, Saturday, January 25, 2014

How much access to their government do Texans deserve?

Some Texas laws would say “not so much.” This is especially true regarding how little citizens are allowed to know about how their local governments offer special incentives to lure business prospects.

This process, called economic development, is one of the least-discussed public policy matters around, and yet the vast majority of Texans are affected by it. That’s because most Texans live in at least one jurisdiction that has engaged in economic development.

It works as follows. A business prospect will approach a locality, or a locality will approach a business, and then enter into negotiations about the business receiving incentives for moving inside the local government’s boundaries. The government then decides what to offer, whether the reduction of taxes over a period of time, offering a sum of cash, giving away land, or all of the above, to mention only a few of the many possibilities. Then the governing body meets to pass whatever agreement was reached, if any.

Except for the passage of the agreement, which must be at a public meeting, every other step in the aforementioned process is done completely in secret, in closed session.

These closed, sometimes called “executive” sessions, are meetings held behind closed doors that are only allowed for specific purposes by the Texas Open Meetings Act, which otherwise requires all government decisions to be made in public. Since 1999, economic development negotiations have been exempt from that requirement. As a result, virtually every special deal negotiated between a city, county, or school district and a private business is done outside of public scrutiny. After a deal is reached, while the agreement is passed publicly, there is rarely any time for public review of the agreement.

That is unfortunate because many economic development agreements involve private businesses receiving tax dollars directly, as in a cash incentive, or indirectly, as in public land being given away at no cost. Another common incentive is the reduction of property taxes for a particular business prospect. Regardless of what incentives are offered, agreements reached are usually outside of the annual budget, and certainly involve major decisions affecting a community.

For these reasons, local governments and their citizens should work together to make the economic development process more transparent by enacting common sense reforms to allow more public input in these important decisions.

Localities should adopt an economic development incentives policy outlining the kinds of deals they are willing to make private businesses with public resources. The policy should spell out what incentives might be offered by the governing body to a private entity. This allows the public to know what is on the table, even if they cannot see the negotiations process.

Citizens should be able to review any agreement that is reached before it is passed. This seemingly obvious measure is absent from the economic development process today, whereupon deals struck in secret are passed immediately out of closed session. Local governments should wait two weeks and hold a hearing for public comment, just as they are required to do for their annual budget, before sealing a deal with a private company.

Finally, the details of existing agreements should be posted on the local government’s website, so that the public can see what has been agreed to previously. Citizens shouldn’t have to jump through the hoops of filing open records requests to see such agreements. They should be easily available.

These common sense proposals do not require local governments to change how they offer public money to private businesses. Whether that is appropriate is another discussion entirely. For now, in Texas, government handouts to businesses are the rule, and transparency in the process is the exception. These proposals would help change that.

Local officials and citizens interested in shifting that balance back to the people should consider making these common sense steps towards good governance.

Jess Fields is a Senior Analyst with the Center for Local Governance at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. He may be reached at jfields@texaspolicy.com.